Friday, January 18, 2013

Thanks for 2012 and The Big Five in 2013

To all the readers of this blog, I wanted to say thank you for your previous and continued interest. 2012 was a very important and, frankly, a big year for us. We've gotten more attention then ever and have more hits per day and then ever before. Looking forward to continuing the dialogue in 2013 and working with each of you to try and fine ways to better improve the delivery of good Retirement Plan Consulting. That said, here's what we have to look forward to in 2013 in the Retirement Plan Industry.

1. Threats to DC plan tax incentives coming from two continuing debates on Capitol Hill — over the nation’s debt limit and about tax reform. This is a very real potential threat that we've discussed previously leading to 'Save My 401k' campaign. I'm told that 55,000 citizens have submitted letters to their congress people to date and more are doing so every day. We are getting their attention.

2. Fee disclosure is not over. We expect DOL regulators to look at advisor fees again in 2013, focusing on critical questions about how fees are paid. This is going to be interesting. As it unfolds, I expect to see enforcement of last year's 408(b)-2 regulations and my opinion is that Plan Sponsors will be held accountable for compliance leading them to ask a lot of questions to their advisors about advisory fees. Could get uncomfortable for some.

3. The definition of a fiduciary and what the advisor’s role in that is. Expect to see a proposed rule from DOL in the second quarter of the year. This debate roles on. Some of us involved in the industry and with the National Association of Plan Advisors will likely have a chance to weigh in on this issue.

4. Lifetime benefits. We know that this issue is an area of great interest to the DOL. We’re moving toward a requirement in this area; probably by March we’ll see a proposed regulation on providing lifetime income estimates on participant statements. This is a great idea. However, there are a lot of great ideas that lead to extremely poor execution. A great example is the next item. The idea of a glide path where people start out more aggressively invested and get more conservative as they age is a great idea. The industry's deliverable on that, the Target Date Mutual Fund, was a poorly executed result (at least from the investors point of view....actually a great deal for those fund companies).

5. Reevaluation of target date funds — in particular, regarding their usage as QDIAs. I'm crossing my finger's that eyes will be open as to the major flaws that exist with the current availability and structure of these funds and hope that the QDIA definition will eliminate these as an option......Keep your eyes open, as there will surely be more to come.